Investors in S&P/ASX 200 Index (ASX: XJO) coal stocks may be eyeing a further cut to dividends in 2025 amid increasing thermal and coking coal supplies coupled with subdued demand growth.
This scenario has seen the price of high-quality Australian thermal coal (primarily used to generate energy) tumble to more than three-year lows of US$115 per tonne. That's down some 23% over the past five months. And it's down 74% from highs of around US$440 per tonne back in September 2022.
Coking coal (mostly used for steel production) has seen a similar pullback in prices.
What's happening with the coal price?
The all-time high coal prices recorded in 2022 were spurred by Russia's invasion of Ukraine and led to soaring profits for the miners. This also resulted in outsized dividends from ASX 200 coal stocks like New Hope Corp Ltd (ASX: NHC), Whitehaven Coal Ltd (ASX: WHC), and Stanmore Resources Ltd (ASX: SMR).
In fact, back in mid-2023, we saw Yancoal Australia Ltd (ASX: YAL) stock trading on a supersized trailing dividend yield north of 25%.
But a warm winter in the northern hemisphere and a big boost in production from countries including China, Indonesia and Australia have put a damper on thermal coal prices. Meanwhile, China's struggling property markets have impacted its steel markets and, in turn, hit the coking coal segment.
Commenting on the slumping thermal coal price, Rory Simington, an analyst at Wood Mackenzie, said (quoted by The Australian Financial Review), "The milder winter has seen [coal] stocks rise and prices decline – as well as record levels of both production and imports in November."
As for coking coal, Simington added, "You could argue that weather has impacted the coking coal price as well – in that, the lack of cyclones has meant steady supply from Queensland."
With thermal coal prices down more than 12% since this time last year, here's how the big ASX 200 coal stocks have performed over the 12 months, compared to the 9% gain posted by the benchmark index:
- Whitehaven shares are down 26%
- Yancoal shares are up 9%
- Stanmore Resources shares are down 28%
- New Hope shares are down 9%
Are ASX 200 coal stocks still profitable?
With coal prices forecast to edge only marginally higher over the remainder of 2025, can ASX 200 coal stocks keep on turning a profit?
Well, even at US$115 per tonne (AU$187 per tonne), New Hope's 80% own joint venture, Bengalla Mine, certainly can.
For the three months to 31 October, New Hope reported Free on Board (FOB) cash costs (excluding state royalties) of AU$61.60 per sales tonne at Bengalla.
As for Yancoal, the miner's overall average cash operating costs for the first half of 2024, again excluding government royalties, came in at AU$101 per tonne of coal.
